Though bankruptcy refers to the process whereby people who owe debt can liquidate certain assets and repay their creditors, bankruptcy takes various forms as outlined by Title 11 of the Bankruptcy Code. Generally speaking, filers must select a specific form of bankruptcy before they file.
Arizona residents may be aware that the most common types of personal bankruptcy are Chapters 7 and 13. Based on certain eligibility criteria, debtors may either be eligible for Chapter 7 or 13 bankruptcy.
Chapter 13 is sometimes referred to as a plan for wage earners. This is because people who have a dependable source of income are the ones who usually use this type of bankruptcy. Based on this income, the debtor submits a repayment plan whereby creditors are paid in installments in three to five years. Repayment plans cannot be for longer than five years. In a system somewhat similar to a consolidation loan, a trustee will be responsible for collecting the plan's specified payments, and ensuring that they reach the creditors.
There are some similarities between Chapter 7 and 13 proceedings, the most important being that bankruptcy puts an automatic stay on foreclosure proceedings. In addition to that, in Chapter 13 bankruptcies, debtors may be able to make delinquent mortgage payments and even all their mortgage payments through the repayment plan, and be able to retain ownership of their home.
In addition to this, Chapter 13 bankruptcies also protect third parties who have co-signed with the debtor onto the consumer debts.
These are just the monetary benefits of declaring bankruptcy-the peace of mind and stress relief that comes with making manageable payments to reduce debt is probably not quantifiable. Arizona residents struggling with debt may want to consider filing for Chapter 13 bankruptcy to avail themselves of these benefits.
Source: US Courts,http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter13.aspx"Accessed February 24, 2015
